Why Hong Kong is thrashing Wall Avenue as the highest spot for IPOs

Buyers and companies’ enthusiasm for Hong Kong’s fairness capital markets is roaring again, as Chinese language firms flocked to the town for fundraising, sparking a frenzy available in the market that had been forsaken in recent times.

Outsized offers and a state-backed push for firms listed within the mainland exchanges to hunt a list in Hong Kong have thrust capital-raising quantity to the strongest first half-year since 2021, in keeping with information from information supplier Dealogic.

New itemizing volumes on the Hong Kong Inventory Change jumped round eight instances to $14 billion within the first half of this 12 months, from simply $1.8 billion in the identical interval in 2024, in keeping with Dealogic. That excluded SPAC listings, or particular objective acquisition firms established solely to boost capital via an IPO, with the purpose of finally buying or merging with one other firm.

That places the town on observe to change into the world’s largest itemizing vacation spot this 12 months, surpassing the Nasdaq and the New York Inventory Change. PwC projected as much as 100 IPOs in Hong Kong this 12 months, with whole fundraising to exceed $25.5 billion.

The frenzy got here after years of lackluster IPO exercise within the metropolis amid post-pandemic risk-off sentiment and stuttering financial development.

Within the first half of this 12 months, there have been 43 new listings in Hong Kong, with proceeds topping $13.6 billion, surpassing the full sum raised in 2024, information from monetary information platform Wind Data confirmed.

As compared, there have been solely 73 listings in 2023, elevating simply $5.9 billion, in keeping with HKEX information.

The renewed curiosity is fueled by a confluence of things, together with Beijing’s regulatory tailwinds, the muted tempo of A-share listings, ample market liquidity, and delisting fears in U.S. markets, driving mainland firms to boost funds in Hong Kong, in keeping with Steven Solar, head of China fairness technique at HSBC.

“The IPO growth within the Hong Kong market is actually pushed by dual-listing of A-then-H [shares],” stated Solar. A-shares discuss with mainland-listed shares, whereas H-shares are these listed in Hong Kong.

“An increasing number of firms use the proceeds to fund their globalization technique,” Solar stated, because the Hong Kong greenback is extra fungible than the Chinese language yuan in international markets.

A leap in Chinese language fairness costs final September, triggered by expectations of stronger financial stimulus, helped flip the tide on bearish narratives about China.

In the beginning of this 12 months, the discharge of DeepSeek’s low-cost however highly effective mannequin additional fueled a rally in Chinese language tech shares as traders started to reassess China’s capability for innovation, spurring a rerating of Chinese language equities.

“Market valuations broadly have improved again to historic common ranges, which offers a greater backdrop for firms trying to fundraise,” stated Eugene Hsiao, head of China fairness technique at Macquarie.

As of Wednesday’s shut, Hong Kong’s Grasp Seng index has gained a stellar 21% to date this 12 months, making it one of many best-performing main markets globally.

Hopes that Chinese language authorities will seemingly unleash extra fiscal spending to protect the economic system from any trade-related shock have additional underpinned enterprise and traders’ confidence.

In an obvious shift to help the non-public sector, Chinese language President Xi Jinping instructed the nation’s high enterprise leaders in February that the nation wants their assist to ship financial development.

That shift, coupled with the long-awaited approval by Beijing for mainland companies to listing offshore, unleashed a wave of pent-up demand, notably for high-quality, consumer-facing firms which are much less uncovered to geopolitical headwinds, stated Lorraine Tan, director of fairness analysis at Morningstar.

Chinese language securities regulator final 12 months issued a slew of measures geared toward fast-tracking approval for eligible mainland tech firms to listing in Hong Kong. Hong Kong regulators additionally launched a so-called “Expertise Enterprises Channel” in Might to facilitate IPO approvals for specialist expertise and biotech firms, notably these already listed within the mainland.

“Coverage encouraging main company residents to listing in Hong Kong have supplied a much-needed shot within the arm” in reviving IPO exercise within the metropolis, stated Perris Lee, head of fairness capital market at Dealogic.

One other driver for Hong Kong’s market rally has been the ample liquidity supplied by mainland traders piling into Hong Kong shares, chasing a man-made intelligence frenzy sparked by Deepseek’s breakthroughs and tapping into main capital-raising offers.

The southbound internet inflows, tracked via the cross-border hyperlink Inventory Join scheme, surged to a report excessive within the April-June quarter, because the scheme was launched in 2014, in keeping with Wind Data.

In stark distinction, China’s benchmark CSI 300 has barely budged this 12 months, up 0.2% 12 months so far, in keeping with LSEG information.

That has prompted onshore traders to shift cash to Hong Kong-listed equities, bolstering the Southbound inflows to account for practically half of Hong Kong’s each day inventory turnover, in keeping with Solar’s estimates.

These components helped push a flurry of mainland China-traded firms to hunt secondary itemizing in Hong Kong, together with battery maker Modern Amperex Expertise.

Already listed in Shenzhen, the corporate raised greater than $5 billion in a secondary itemizing in Hong Kong in Might, in what’s the world’s largest such providing to date this 12 months.

Among the many over 200 energetic IPO candidates within the pipeline to be listed on HKEX, over 40 are firms already listed on mainland inventory exchanges, Wind Data confirmed.

Excessive-profile firms that sought a major itemizing in Hong Kong this 12 months included bubble tea retailers Mixue Group, Guming Holding and ride-hailing platform operator Caocao Inc.

“The urge for food to boost offshore funds, particularly in HKD, is a mirrored image of broader plans to develop into abroad markets,” stated Hsiao.

Amid cutthroat competitors at dwelling and flared-up commerce tensions with the U.S., Beijing has referred to as on its main firms to develop globally and diversify their manufacturing places.

Moreover, Hong Kong’s market is extra “inclusive” of rising sectors, like AI, renewable power, digital consumption and biotech, which align with mainland companies’ wants, stated Wei Li, head of multi-asset investments for China at BNP Paribas.

The heightened U.S.-China tensions have made Hong Kong a most popular IPO vacation spot for a lot of Chinese language companies, over considerations that the Trump administration may order a delisting from U.S. exchanges.

“A secondary itemizing primarily offers further insurance coverage for U.S.-listed Chinese language firms in an unlikely occasion {that a} delisting turns into unnegotiable,” stated Lee, suggesting that firms are prone to have engaged monetary advisors to hammer out a “plan B,” with or with out delisting.